Question

1. The company is expected to pay out 5 EUR as dividends, next year. What is the fundamentally correct value for the company stock if the dividends are expected to grow 3.0% a year and the required return of stock investors is 13%.

(Please round up your answer to the nearest full number. For example answer 80.213 should be presented as 80)

2. What is the cash conversion cycle (CCC) for a firm with days in receivables period of 20 days, a days in payables period of 45 days, and days in inventory period of 10 days?

3.

Manufacturing company borrows 8 million euros from the bank to fight the consequences of the corona virus. The repayment schedule is based on an annuity. The interest rate is 8% and the loan is paid back with 6 annual payments.

Question:

* What is the loan balance immediately the first loan payment is made?

Answer 1

1.

PRICE = EXPECTED DIVIDEND / REQUIERD RETURN - GROWTH RATE

= 5 / 0.13 -0.3

= 5 / 0.1

= 50

2.

CCC = days receivable + days inventory - days payable

= 20 + 10 - 45

= -15 = 0

as the cash conversion cycle cannot be negative therefore CCC is zero

3.

LOAN INSTALLEMENT = P x r x (1+ r )ⁿ / (1+ r )ⁿ - 1

= 8000000 x 0.08 x (1+0.08)⁶ / (1+0.08)⁶ - 1

= 640000 x 1.586874323 / 0.586874323

= 640000 x 2.703942328

= 1730523.09

Interest part in installment = 8000000 x 8%

= 640000

BALANCE AFTER YEAR 1 = LOAN -(INSTALLMENT - INTEREST )

= 8000000 - (1730523.09 - 640000)

= 8000000 - 1090523

= 6909476.91